Wednesday, June 17, 2009

 

The Great Debt Unwind

Plenty has been said about how the enormous amount of debt around the world will have to unwind. Remember, along with cheap fossil fuel energy, debt has been the lifeblood of the modern economy. Consumers, businesses, local governments, and national governments all borrow money to finance purchases and operations. Without debt, very little would be happening, especially not on the large scale of the global economy, which is why there is so much fuss about unfreezing credit (a fancy word for debt). It’s also worthwhile to remember that cheap and plentiful fossil fuel energy ultimately underwrites all this debt, as everyone assumes that continuing economic growth — which is made possible by that energy — will enable borrowers to pay back their loans, with interest.

So it is that, with cheap, plentiful, high-quality oil now being a thing of the past, the global economic engine is running below capacity, and indeed is starting to sputter alarmingly. As you might guess, the Great Debt Unwind has begun. For details on the shocking truth, I invite you to read this article, New, Hard Evidence of Continuing Debt Collapse!, which analyzes the figures in the US government’s Flow of Funds Report. It’s clear that instead of achieving a recovery, the situation is actually getting worse, and at a hair-raisingly fast pace.

Now is the time to prepare for inevitable economic contraction sparked by shrinking credit and energy.



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